Week in Review: Alumina prices prove a bane for Century, Vedanta and Alumina

The week ended February 25 saw many major aluminium producers, with and without integrated operations, losing their last quarter or full year margins to alumina prices. Alcoa's Australian partner Alumina Limited who reported full year result for 2016 on February 23, registered a loss of $US30.2 million ($A39.3 million) down from a $US88.3 million ($A114.8 million) profit in 2015. The loss, although attributed mainly to restructuring-related write-offs, was also due to lower alumina prices in the first half of the year, and lower volumes after curtailing capacity across its refineries.

Century Aluminum Company also reported a net loss of $168.5 million ($1.93 per share) for the fourth quarter of 2016 proving analysts' projections of it staging a turnaround wrong. Results were negatively impacted by a $152.2 million ($1.75 per share) impairment charge related to the Helguvik project in Iceland. The fourth quarter adjusted net loss was $11.5 million ($0.12 per share).

Earlier this week, it was reported that higher input cost, especially the rising alumina prices, could dent the Q4 2016 results profitability of the North American country. Since Century Aluminum sources alumina from outside parties, its cost of production escalated sharply with the surge in alumina prices during the last quarter, as a result of which its margins were hurt.

Vedanta Aluminium's average cost of aluminium production in third quarter of 2016-2017 was $1429 per tonne. The smelter at Jharsuguda reported hot metal production cost of $1388 a tonne. Though Vedanta’s power costs were lower, higher alumina import price ($304 per tonne) weighed on.

In alumina, the two streams of the Lanjigarh refinery produced 0.32 mt in October-December period. The refinery currently has a de-bottlenecked capacity of 1.7 - 2.0 tonnes per annum and we expect to produce 1.3 tonnes in FY17 to offset high alumina import prices, Vedanta stated in a statement.

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In the global alumina export-import market, India was reported to export about 1.5 million tonnes of alumina in year with China and UAE ranking as the top importer countries. Reliable industry sources revealed, Bahrain would be importing about 2 million tonnes of alumina per annum to feed its smelter. This alumina would mostly come from Australia, India and Saudi Arabia.